Compensation for Directors and Executive Officers

Compensation for directors is made up of basic compensation as fixed pay and stock-based compensation. The ratio for the base amount of basic compensation to stock-based compensation is 3-to-1. The methods for determining each type of compensation are as follows.

The amount of basic compensation is decided by adjusting the base amount to reflect full-time or part-time status, committee membership and position, meetings attended, and other factors.

Restricted stock-based compensation units (RSU) are granted to serve as an incentive to provide management oversight and advice with the medium- to long-term enhancement of corporate value in mind. After three years have passed, Hitachi provides an amount equivalent to the granted units in the form of common stock or cash. A director concurrently serving as an executive officer is not paid compensation as a director.

Compensation for executive officers consists of basic compensation as fixed pay and short-term incentive compensation and medium and long-term incentive compensation as variable pay. The ratio of base amounts for each form of compensation is determined to ensure the enhancement of corporate value through global business growth, referencing ratios for executive compensation at leading global companies, including those in Europe and the United States. In the case of Hitachi’s President & CEO, this ratio is 1.0:1.5:3.0. In addition, ratios are set so that the higher the rank of an executive officer position, the greater the variable compensation as a percentage of total compensation. The details of compensation are disclosed in the “Compensation to Directors and Executive Officers, etc.” section on page 98 of Hitachi’s Annual Securities Report (the 156th business term).

Set according to the relevant position by adjusting that amount to reflect financial results and individual performance.

A base amount is set based on the individual’s position, and the amount will be determined in a range of 0-200% of the base amount, based on business performance and the individual’s results in their assigned duties.

With the aim of promoting management from medium- to long-term perspectives and providing incentives for the sustainable enhancement of corporate value by having executives share more value with shareholders through the holding of shares from the moment they assume their posts, a base amount (base amount of medium- to long-term incentive compensation (LTI base amount)) is set based on the individual’s position, and restricted stock compensation and performance-linked restricted stock compensation are granted based on incumbency conditions.

Also note that Hitachi may request the return of compensation if a director is determined to have been involved with misconduct during their term of office (clawback policy.) 

①Strengthening the link with the management plan

• Adopt the key indicators set forth in Inspire 2027 as KPIs（STI・LTI）

②Strengthening the link with Corporate Value Enhancement

• Set a high ratio of stock price condition compensation
• Establish a global competitive comparison (LTI)

At Hitachi, the Compensation Committee, composed of a majority of independent outside directors, determines the policy for compensation of directors and executive officers, as well as the individual compensation details and amounts based on that policy. Starting in fiscal 2023, to strengthen sustainable management and enhance corporate value, the weighting of sustainability targets in short-term incentive compensation (STI) was set at 20%. In addition, for long-term incentive compensation (LTI), if sustainability targets are achieved, additional shares equivalent to 10% of the standard amount are granted.

From fiscal 2025, selected KPIs and targets from the newly formulated sustainability strategy PLEDGES have also been incorporated into the evaluation of executive compensation to further foster its implementation.

*1 Set an ambitious target of 80 points (base target is 75 points) for gross profit margin*2, exceeding global competitors.